Prior to 2013- Surcharging Completely Banned
Before 2013, credit card surcharging was restricted in all 50 states by the four major credit card providers- Visa, Master Card, American Express, and Discover Card. They feared that credit card surcharging would cause consumers to stop using credit cards. Some industries, like gas stations, were given an exemption from the rules, but surcharging was not an option for most merchants.
2013- Credit Card Companies Settle
In 2013, a group of merchants challenged the legality of the credit card companies’ ban on surcharging. Rather than going through an expensive and lengthy trial, the credit card companies settled, removing their blanket ban on credit card surcharges. However, because of restrictive state laws and bans, most merchants still weren’t allowed to impose a credit card surcharge.
2015- First Major Court Case
The first major challenge over a state surcharging ban was Bondi v. Dana’s Railroad Supply, which was decided in November 2015. In the case, a family-run hobby shop, outdoor sporting goods store, discount furniture store, and specialty jeweler each informed their customers that they would be charged an extra fee for using a credit card in order to cover processing fees. The state of Florida responded by sending the four small businesses cease-and-desist letters, threatening to charge them with misdemeanors under Florida’s no-surcharging law. The businesses joined together to sue the state of Florida, and in November 2015, the United States 11th Circuit Court of Appeals ruled in favor of the businesses, citing the Free Speech Clause of the First Amendment.
2017- The Supreme Court Weighs In
With the precedent set in Florida, the hair salon Expressions Hair Design challenged a very similar surcharge ban in New York. The 2nd Circuit Court of Appeals ruled in favor of New York, but Expressions Hair Design kept fighting until the case landed in front of the Supreme Court. In March 2017, the court unanimously ruled that New York’s law is unconstitutional and a violation of the First Amendment.
2018- Tides Turn
After the Supreme Court ruling, a seismic shift occurred. Courts struck down surcharging bans in both Texas and California. As of March 2019, surcharging is legal in 44 states. The remaining six states- Maine, Connecticut, Massachusetts, Oklahoma, Colorado and Kansas, – have laws that are very similar to the unconstitutional laws stuck down in New York and Florida, so it is likely only a matter of time before they get challenged and overturned too.